Successful investors seem to all give the same advice: Be sure that you diversify your portfolio. But what exactly does that mean? There are stocks, bonds, hedge funds, precious metals, and more that you can choose from. What’s the secret formula?

Too much stock in one area or not enough in another can actually make your portfolio worse, so how do you know if you’re navigating your funds in the right direction?

There are many ways to diversify and multiple mixtures you can end up with. Investing without a clear direction will give you a muddy mix of stocks that might not help you meet the financial goal you are heading for.

Questions like whether or not precious metals are a good investment often come up when someone is looking to diversify. The answer lies in these few basic investing rules.

Basic Investing Rules

Instead of randomly choosing where to invest your funds into or jumping on board any new investment that looks like it might be too good to be true, look at the tried and true methods that have been reaping benefits to their investors for long terms.

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Keep your number of investments small. The more investments you own, you are probably heading into some that you don’t need, obtaining some that overlap, and essentially creating a system of “wash,” where one investment reaps higher benefits while another loses you money.

Stick to investments that you understand. You may receive a lot of talk when someone is trying to convince you to make an investment in something, but if you don’t understand how it works, steer clear. Precious metals are tangible items that have been around forever and the highs and lows of their value are simple to understand.

Make sure you know why you bought the investment. Have a solid reason for your investment. If you can’t back up why you own it and the role it plays in your portfolio, chances are you don’t actually need it.

Always adjust your portfolio for balance. A well-balanced portfolio does not just sit around. Instead, you should continually be checking your assets and the returns you are getting. Selling off shares of high-return stock so that you can put money into those who were falling behind but still have good potential is a common rebalance. However, you shouldn’t constantly be adding new investments. This will mess up your balancing act.

How Do Precious Metals Fit into These Rules?

Proponents of precious metals support these investments because they are tangible assets. They are commodities that can’t disappear into the negative. They keep their intrinsic value, which helps to keep your portfolio balanced. For the most part, you know what to expect from your investment.

It’s easy to insert precious metals into your portfolio: they fit all of the rules, as long as you aren’t overinvesting or widely diversifying into two many areas. As far as explaining why you chose this commodity to invest in, it’s simple to see that, especially with all of the uncertainty in the economic world today, precious metals provide a hedge against an economic collapse of the dollar or other currency.

Opponents of precious metals believe that the likelihood of an economic collapse is minimal and, if there was a collapse, you’d be better off owning a lot of chickens and sheep than precious metal. While true in essence, you will be more financially set with those assets than without them.

However, just like with any other asset, the trick is to not overinvest. No matter what the commodity is, overinvesting leads to an unbalanced portfolio. Instead, research the options available and invest in those with the highest chance of return.

Gold is always the first metal that people think about when it comes to asset investments of precious metals, but the volatility and low return of inflation make this type of metal a poor choice for your portfolio.

Silver, however, is a common choice for those who don’t want to take the risk of gold. This metal has an up and down history, used for major industries like photography, then pushed aside as technology adjusts. However, that same technology has ensured the high demand for silver as it is used in electrical appliances, batteries, medical products, and more across the world. Silver coins from LPM Group Limited and other reputable sources are used in many successful investors’ portfolios.

Platinum is another option in the precious metal sector. Most of the demand for this metal comes from the automotive industry. Platinum is used to reduce harmful emissions, which is a huge consideration in today’s economically friendly environment. It is also commonly used for jewelry and computers.

Platinum mines are mostly found in South Africa and Russia, increasing the already high prices. Some automotive companies have found ways to recycle auto catalysts to save on production, or to use palladium instead (platinum’s less expensive version).

Both silver and platinum have a logical use outside of sentiment and jewelry, making them safer and more reasonable investments should you choose to look into the precious metals asset for your portfolio.

Investments are Chances, and Precious Metals are Good Ones

As with any commodity, you are taking the chance that your initial investment will be paid back and you will see a return of some kind on it. Sometimes this happens, sometimes it does not.

Stocks, bonds, and hedge funds make up many portfolios, but if the dollar collapses, so does your financial outlook. By keeping tangible assets like precious metals as part of your portfolio, you are staying balanced and following the four main rules of diversifying your investments.

Choose your precious metals, and all of your investments, wisely, and don’t overinvest. Continue to monitor your assets, trading and selling when necessary, to create a balanced portfolio that does not need much more work after you have reached that balance.

The right investments done the right way will set you up for your future, your retirement, and your other goals.

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